Building a better car to sell on the Internet

An American entrepreneur believes the Internet can help him succeed where Tucker, Bricklin and DeLorean failed. Scott Painter, founder and former CEO of U.S. online car-buying service CarsDirect.com, has formed Build-To-Order Inc. of Fremont, California. The company plans to re-create vehicles of the past and sell them on the Internet to Americans. Although Build-To-Order is little more than one man's dream, Painter seems confident he will succeed.

Painter arrives 10 minutes late for an interview. He wears a suit and white shirt but no necktie - a casual look for a former class president of the U.S. Military Academy. During his interview, the athletic 32-year-old describes his visits to the Lotus factory in England and the Toyota assembly plant in Kentucky.

INDUSTRY HAS CHANGED

'The state of the industry today is like it's never been before,' says Painter. 'For the first time you can contract, engineer and manufacture a complete automobile using parts, modules and components that are going into other vehicles.'

Painter wants to acquire the rights to a defunct car company brand. He would update the vehicle's design, then pay suppliers to build a modular platform and components. Build-To-Order would assemble the vehicles and sell them for $35,000 to $40,000.

If the concept seems familiar, it is. Robert Lutz, former vice chairman of Chrysler Corp., also has plans to build a vehicle for which suppliers would provide parts and assembly. But Lutz plans to sell his Cunningham C-7 coupe for about $250,000. And Painter has a different way to sell his vehicles: Build-To-Order would sell the cars through the Internet rather than through dealerships.

Painter says he already has raised $10 million. He says he would have to sell 6,000 vehicles per year to break even, and hopes to sell up to 40,000 units annually.

Painter faces big obstacles, says W. Daniel Garretson, senior analyst at Internet research firm Forrester Research Inc. of Cambridge, Massachusetts. 'There is, of course, getting some of the design resources in place and getting the suppliers to work together to build this vehicle,' he says.

Garretson, an expert on build-to-order issues, says there is the challenge of 'building a brand that people will purchase and creating that brand recognition.'

Talk is cheap. Building cars is not. But Painter is a veteran money-raiser. 'We raised almost $400 million and did it privately,' he says of his experience at CarsDirect.com. 'My strategy was to give the company 10 years of cash because I had no idea what the market was going to do next.' As it turned out, CarsDirect.com is one of the few remaining Internet car-selling services. But, like most others, it has not turned a profit.

'What I learned at CarsDirect is that there's a market for online buying,' says Painter, who still owns about 7 percent of the company. 'I really became a student of what that market was.'

Painter says Build-To-Order will seek 'early adopters.' These are educated 25- to 35-year-old men who earn at least $70,000 a year. They live in such U.S. cities as San Francisco, Los Angeles, New York and Seattle. 'They believe in the Internet,' he says. 'They believe in technology. What are these folks buying? They're buying the halo cars. They're buying Audi TTs. They're buying Porsche Boxsters.'

THE CHALLENGE

But will they buy Painter's products? Affluent consumers can turn to such established companies as Volkswagen, Ford or BMW to buy retro cars such as the New Beetle, Thunderbird or Mini.

Painter will not say which brands he is considering, but rich Americans just might like to be seen in an updated Bugatti Atlantic or a Bugeye Sprite. Painter says he might even create a brand. But he would prefer to resurrect a famous name. Vespa did that this year when it reintroduced its motor scooter to the United States after 15 years.

Whatever vehicle is chosen, 'We will fail if we build an ugly car and have the wrong brand,' Painter says. He leans forward. 'We've got to come out with the hottest, most compelling, coolest cars.'

Build-To-Order will concentrate its marketing efforts in cities where the early-adopters live, though Painter says he will sell to consumers regardless of location. Each city could have 'experience centers' where buyers could test drive and customize the vehicle. Painter says customers will be able to change styling, options and accessories.

Painter says he has a plane to catch. As he concludes, he talks about the challenges ahead. 'We're not ready for prime time, nor do we want to prove anything to anybody right now,' he says.

Before he leaves, Painter turns philosophical. 'If building cars to order works,' he begins, 'you're talking about changing mass production to mass customization. The implications of that are so profound because it changes the entire system, and not just for cars.'

No doubt Tucker, Bricklin and DeLorean felt the same way about their business models.